Take insurance policy, SEC orders market operators

The Securities and Exchange Commission has announced the amendment to the Fidelity Bond, which requires capital market operators to maintain an insurance policy.

SEC, in a notice on Monday, said the insurance policy was compulsory for all operators and was expected to cover all aspects of the insured business activities and risks.

It said amendment was in line with Section 313 of the Investments & Securities Act 2007, Rule 27, which brought about the creation of Rule 27A.

SEC said the amended rule became effective December 23, 2019 while the implementation of the new rule would commence on January 1, 2020.

The notice read in part, “Affected capital market operators are invited to note that the implementation of the new rule shall commence on January 1, 2020.

“The Insurance policy will be required to run for a full year (January 1, 2020 – December 31, 2020) and renewable annually.”

SEC also amended the rules on collective investment schemes.

It said with respect to related party transactions, fund managers who had been barred from investing in in-house, trustees, custodians and associates’ instruments were now permitted to do so but with limits.

The notice read, “The fund manager of a CIS may invest in money market instruments issued by the affiliates of a related party to a CIS only where the money market instruments issued are not below investment grade rating of A- and at yields better than prevailing market rates.

“Such a situation also requires the consent of the trustees for compliance with pre- conditions for such investment.

“The investment in money market instruments of a related party’s affiliates should also not exceed five per cent of the total value of money market allocation for equity funds and balanced funds, 15 per cent for money market funds, 10 per cent for fixed income funds and two per cent of 10 per cent allowable exposure to liquid assets for real estate investment trusts.”

SEC added that the CIS Trustee was required to report to the commission compliance with set limits, provided the fund manager was prohibited from undertaking investments on behalf of a CIS in the fund manager’s, custodian’s and trustee’s assets or instruments.


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